Surety Bond Encyclopedia

Mortgage Broker Advanced Fees ($100,000) Bond - Statewide in Pennsylvania

Brief Summary

This $100,000 bond is only for Pennsylvania mortgage brokers who accept advance fees. A broker that can show the Department of Banking and Securities it does not and will not take them is exempt. If you do collect fees up front, the bond has to be in place before the license issues, and it sits on top of the separate originator bond every licensed broker carries.

Under 7 Pa.C.S. 6131(e)(1), a Pennsylvania mortgage broker that accepts advance fees must obtain and maintain a $100,000 surety bond before the Department of Banking and Securities issues the license. The bond runs to the Commonwealth and is also for the use of any person with a claim against the broker for failing to carry out the terms of any provision for which advance fees were paid. Brokers who show the Department they do not and will not accept advance fees are exempt from this bond, but not from the separate tiered bond covering their sponsored mortgage originators.

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How to Apply for a Mortgage Broker Advanced Fees ($100,000) Bond:

Decide whether the business will accept advance fees. If it will not, raise the exemption in 7 Pa.C.S. 6131(e)(2) with the Department before buying this bond.
Estimate first year origination volume to set the separate originator bond tier.
Use the full legal business name, every trade name and the business address exactly as they appear on the NMLS application.
Owner and control person details for the surety's credit review.
Pay the premium and receive the executed $100,000 bond.
Provide the bond in the NMLS surety bond section with the Pennsylvania mortgage broker license application.

Detailed Information About the Pennsylvania Mortgage Broker Advanced Fees ($100,000) Bond:

Two different bonds

Pennsylvania mortgage brokers face two bond requirements in 7 Pa.C.S. 6131(e), and they are easy to mix up.

The first, in section 6131(e)(1), is the $100,000 bond on this page. It runs to the Commonwealth and is also for the use of any person with a claim against the broker for failing to carry out the terms of any provision for which advance fees were paid. Section 6131(e)(2) exempts brokers who demonstrate to the satisfaction of the Department that they do not and will not accept advance fees.

The second, in section 6131(e)(3), covers the mortgage originators the broker sponsors. That bond is tiered by the dollar volume of mortgage loans the broker's originators originate:

$50,000 for less than $15,000,000
$75,000 for $15,000,000 to $29,999,999.99
$100,000 for $30,000,000 to $49,999,999.99
$150,000 for $50,000,000 or more

A new applicant uses anticipated first year originations to pick the tier. At renewal, the tier follows the volume shown on the licensee's periodic reports. A broker that takes advance fees carries both bonds.

Bond terms set by statute

The surety must be authorized to do business in Pennsylvania. The bond must be in place before the license is issued, and it must state that it cannot be canceled for any cause unless the Department receives notice of intent to cancel at least 30 days before cancellation takes effect.

Fees, filing and renewal

Section 6132 sets the mortgage broker license fee at $1,000 for the principal place of business plus $250 for each branch office, and the annual renewal fee at $500 plus $250 per branch. The Department requires every mortgage applicant to apply for and manage the license through NMLS, and the NMLS Pennsylvania mortgage broker checklist has the bond provided in the NMLS surety bond section. The principal's name and address on the bond must match the applicant's full legal business name, including any trade names, and address exactly. Licenses renew each year on the licensee's renewal date under section 6134.

Who is outside the licensing chapter

Section 6112 lists persons excepted from the licensing requirements, including banking institutions and federally or state chartered credit unions.

Eligibility and Requirements for a Pennsylvania Mortgage Broker Advanced Fees ($100,000) Bond:

$100,000 bond under 7 Pa.C.S. 6131(e)(1), required only of brokers that accept advance fees.
Bond runs to the Commonwealth of Pennsylvania and is also for the use of anyone with a claim over advance fee terms the broker failed to carry out.
Surety company authorized to do business in Pennsylvania.
No cancellation without at least 30 days notice to the Department of Banking and Securities.
A separate originator bond tiered from $50,000 to $150,000 by origination volume under section 6131(e)(3).

Pennsylvania Mortgage Broker Advanced Fees ($100,000) Bond FAQs:

Do I need this bond if I never take fees up front?

No. Section 6131(e)(2) exempts brokers who demonstrate to the satisfaction of the Department of Banking and Securities that they do not and will not accept advance fees. The exemption covers this $100,000 bond only. It does not remove the originator bond in section 6131(e)(3).

Is this the same as the broker bond that goes up with loan volume?

No. The tiered bond, from $50,000 to $150,000, covers the originators the broker sponsors and is set by origination volume. The $100,000 advance fee bond is a flat amount tied to fees collected up front. A broker that accepts advance fees posts both.

Who can make a claim on the bond?

The bond runs to the Commonwealth and is for its use. It is also for the use of any person with a claim against the broker for failing to carry out the terms of any provision for which advance fees were paid.

Can the surety cancel the bond without warning?

No. The statute requires the bond to say it cannot be canceled for any cause unless notice of intent to cancel is given to the Department at least 30 days before cancellation takes effect.

How is the premium set?

The surety underwrites the brokerage and its owners, looking at credit and business financials. The $100,000 amount is fixed by statute, so underwriting decides the premium.